U.S. accused of blinking on China trade standoff as N. Korea meeting looms

'China is winning the negotiations,' said one Republican senator.

President Donald Trump welcomes Chinese President Xi Jinping at Mar-a-Lago state in Palm Beach, Florida on April 6, 2017.Carlos Barria / Reuters file

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May 21, 2018, 7:48 PM GMT / Updated May 21, 2018, 8:50 PM GMT

By Martha C. White

On Sunday, the Trump administration surprised the business world by announcing it would pull back on its plan to impose tariffs on Chinese goods. After many months of threats and tweets about China's unfair trading practices, suddenly the U.S. was "putting the trade war on hold," in the words of Treasury Secretary Steven Mnuchin, and it was not clear what, if anything, China had to give up in return.

That led to charges that China had outmaneuvered President Donald Trump.

"I think this president has shown in a number of different issues that he wants a headline more than he actually wants to solve a problem," said Gabriel Horwitz, vice president for the economic program at Third Way.

"China is winning the negotiations," Sen. Marco Rubio, R-Fla., wrote in a tweet. "Their concessions are things they planned to do anyways. In exchange they get no tariffs, can keep stealing intellectual property & can keep blocking our companies while they invest in the U.S. without limits."

The abrupt reversal had even seasoned trade experts scratching their heads, with some expressing concern that the United States had weakened its position with on-again, off-again threats of a trade war.

“There’s a big question mark as to who’s actually put points on the board, and has the overall macroeconomic dynamic shifted at all?” said Horwitz.

Some economists say it has not. “This is the first step in conflict avoidance, not the end of the story,” said Jeffrey Schott, senior fellow at the Peterson Institute for International Economics. “It has not resolved any problem.”

If anything, there is concern that a lack of consistency — possibly due to a power struggle between the free trade-espousing Mnuchin and Peter Navarro, outspoken trade hawk and director of the White House National Trade Council — could undermine American credibility at the negotiating table.

“My instinct is that the Trump administration is trying to use the power of access to the U.S. market as a tool to get China to change its policies,” said Michael O. Moore, a professor of economics and international affairs at George Washington University.

Of the current lull, he said, “This suggests that they’re trying to work out some kind of a deal that would allow the Chinese to save face, Trump to save face, and avoid a trade war.”

But this pride-centric jockeying for a symbolic “win” could be ultimately damaging to American economic momentum, economists warned.

“It’s weakened our standing on an international level,” Horwitz said. “Trying to start a trade war is just one example in a litany of things this administration has done.”

Trade experts said it was far from clear that increasing Chinese imports by $200 billion would be effective, or even achievable.

“It’s not clear how you would do it and what other countries would lose,” said Barry Bosworth, senior fellow of economic studies at the Brookings Institution. “There’s never been such a demand before — it’s a complete departure from the notion of international rules and institutions governing trade,” he said.

“The issues don’t seem to have been thought out at all, except for the vague idea that these terms are unfair. That’s not going to get them very far,” Bosworth said.

"The administration’s inconsistency presents a challenge — for trade negotiators as well as American business leaders."

The tenuous status of Trump’s planned meeting with North Korean leader Kim Jong Un next month is another factor looming over the negotiations, some experts say, pointing to China’s longstanding position of influence on the leaders of the isolated country.

“The U.S. administration does not want this big conflict with China emerging right in the middle of its commitment to have negotiations with North Korea,” Bosworth said.

“All of this is definitely intertwined, for sure,” Horwitz said, but he added that the administration’s inconsistency presented a challenge — for trade negotiators as well as American business leaders trying to figure out whether or not they should invest in workers, equipment or other financial commitments.

“When we think about hiring and consumer products and pricing — all of these forces in our economy rely on some sense of certainty,” he said.

In a global economy, the impact could be great: Businesses that compete with China and those that export to it could be reluctant to expand, Moore predicted. “When someone is hiring, they’re not looking at rumor and speculation. That’s the real world,” he said.

The longer this drags on, the more detrimental it could be to the domestic economy, according to Schott.